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Recurrent funding

Total government contribution

Of the two broad categories of government funding to schools, recurrent and capital, recurrent funding, which supports the ongoing operating expenses of schools, is by far the most significant.

Although Independent schools depend primarily on private sources for their recurrent income, government funding is a significant and necessary component of the income of virtually all Independent schools in Australia.

For the sector as a whole, about 46 per cent of school income came from government sources in 2018. However, the amount of government funding which individual Independent schools receive varies widely.

In Australia’s federal system of shared responsibilities, the Australian Government has taken the primary role in providing government funding for non-government schools, while state and territory governments are the primary source of support for government schools. Conversely, state and territory governments generally contribute much lower levels of funding to non-government schools, and the Australian Government provides a lower share of the government funding for government schools.

In 2017-18, Australian governments, both Commonwealth and state and territory, spent a total of $61.5 billion on school education. As the table below shows, $46.6 billion of this public investment went to government schools and $14.9 billion went to non-government schools.

 

Recurrent funding for school education, 2017-18 ($ billion)

Source: Productivity Commission ‘Report on Government Service Provision’ and Australian Government Department of Education

In 2017-18, some 66 per cent of school enrolments were enrolled in government schools, which received 76 per cent of total government expenditure on schooling. In comparison, non-government schools accounted for 34 per cent of enrolments and 24 per cent of total government expenditure. Forty two per cent of non-government sector students are enrolled in Independent schools.

Enrolments and government funding by sector, 2017-18

Source: Productivity Commission ‘Report on Government Service Provision’ 2020 and ABS Schools Australia 2019

On an individual student basis, total government spending in 2017-18 on each student in government schools averaged $18,390, while in non-government schools (both Catholic systemic and Independent schools) this was $11,190 per student. Average government expenditure on students in Independent schools is estimated to be about $9,890 per student, or 54 per cent of the average spending per student in government schools. As the table below shows, Independent school students receive considerably less government funding than their counterparts in government schools.

Average per student government funding by sector, 2017-18

Source: Productivity Commission ‘Report on Government Service Provision’ and Australian Government Department of Education

Most of the costs of schooling in the Independent sector are met from the fees paid by parents. It is estimated that the total saving to government expenditure from students attending non-government schools in 2017-18 – both Catholic systemic and Independent schools – was $9.5 billion, and the saving from Independent schools alone was $4.8 billion. This is based on a calculation of the recurrent amount that would be required from taxpayer funds if all Independent school students attended government schools where they would be fully publicly funded.

Australian Government funding model

The SRS funding model funding model was introduced in 2014 under the Australian Education Act 2013 for Australian Government funding for all schools. Under the Schooling Resource Standard (SRS) funding model Australian Government recurrent funding is provided as a base grant with additional loadings aimed at addressing disadvantage. The latter funding is directed towards the support of particular groups of students, such as students with disability, students with low English language proficiency and indigenous students. The SRS funding model has been amended several times since 2014 with the most recent changes being introduced in 2020 in relation to the ‘capacity to contribute’ (CTC) methodology.

Full transition to the SRS funding for all schools is now expected to take place by 2029.

Base funding

The per student base funding component of the funding model is based on the Schooling Resource Standard (SRS), intended as a measure of the cost of effective and efficient provision of schooling. The SRS is a measure of the resources used by a sample of high achieving schools, identified by their performance in the National Assessment program – Literacy and Numeracy (NAPLAN) and excludes any measure of disadvantage.

Government schools are entitled to receive the full amount of the SRS base funding. The SRS base funding amount for non-government schools is adjusted according to a measure of ‘capacity to contribute’. As the table below shows, schools with a higher SES score receive a lower level of per capita base funding.

 

‘Capacity to contribute’ settings for non-government schools, 2019

Source: Australian Government Department of Education

Some non-government schools, such as special schools, special assistance schools, majority indigenous student schools and remote ‘sole provider’ schools are also entitled to receive the full SRS per student amount.

SRS funding has been  indexed annually from 2018 to 2020 by 3.56% and from 2021 indexation moves to a floating measure of 75% Wage Price Index and 25% Consumer Price Index with a floor of 3%.

Capacity to Contribute

Prior to 2020, capacity to contribute was solely determined by a measure of the school community’s socio-economic status (SES) based on the ABS Census of Population and Housing. From 2020 a new methodology for calculating CTC will be phased in over three years. The new Direct Measure of Income (DMI) methodology uses the personal tax income data of parents and guardians to calculate the median income in a school which is used to determine the CTC score for a school.

The new methodology for calculating SES scores requires the collection of the names and addresses of students’ parents and guardians from non-government schools every year which are then provided to the Commonwealth Department of Education as part of the student address collection.

These names and addresses are then linked to personal income tax records in the Multi-Agency Data Integration Project (MADIP), a secure ABS data environment which enables linkages between large government data sets.

The phase-in arrangements mean that schools will be funded on the basis of ‘best-of’ 2011 Census SES scores, 2016 Census SES scores or DMI scores in 2020 and 2021 with all schools transitioning to DMI scores in 2022.

Loadings for disadvantage

The funding model, once fully implemented, will include a component of loading to address specific areas of educational disadvantage. These are:

  • Size (to take account of the particular circumstances of small schools, and schools outside metropolitan areas)
  • Location (based on Accessibility/Remote Index of Australia (ARIA))
  • Socio-Educational Disadvantage (this applies to the lowest 50 per cent of students using the Socio-Educational Advantage quartiles which are a component of the Index of Community Socio-Educational Advantage (ICSEA))
  • Students with disability (using the Nationally Consistent Collection of Data on School Students with Disability)
  • English language proficiency (Disadvantaged LBOTE)
  • Indigenous students

While all loadings are to be fully publicly funded, they are subject to transition arrangements.

Transition Arrangements

The transition arrangements for schools to move on their SRS entitlement have changed several times since the funding model was introduced in 2014.Originally the SRS funding model involved a 6 year transition period, from 2014 to 2019 though some schools that were funded well above the SRS would have taken up to 100 years to transition down the correct level of funding.

From 2018 the SRS funding model aimed to transition all schools to the same amount of Commonwealth funding for the same students. For government schools, the Commonwealth share was set at 20 per cent of SRS and for non-government schools, the Commonwealth share was set at 80 per cent of SRS. Non-government schools currently funded below 80 per cent Commonwealth share were intended to transition up to 80 per cent of SRS over six years to 2023. Non-government schools currently funded above 80 per cent Commonwealth share were intended to  transition down to 80 per cent over 10 years to 2027.

The changes to CTC in 2020 also included amended transition pathways for schools which take into account the move to DMI CTC scores. Schools transitioning up will still complete their transition in 2023 however schools transitioning down will complete their transition in 2029. This gives schools transitioning down to their entitlement an additional 2 years to complete their transition.

New schools will be funded by the Commonwealth at 80 per cent of SRS plus relevant loadings for disadvantage.

State and territory funding

State and territory government funding made up approximately 24 per cent of total government recurrent funding for Independent schools in 2018. While the amount of funding provided by each state and territory government to the non-government school sector varies, the contribution is significant to individual schools, and in many cases is crucial to their financial viability. Under the SRS funding model the Commonwealth will fund Independent schools at 80 per cent of the SRS with the state and territory government funding the remaining 20 per cent or a lower agreed percentage of the SRS based on bilateral agreements  negotiated between state and territory governments and the Australian Government. Some state and territory governments now use the SRS funding model for their own funding purposes and others continue to  fund schools according to their own methodologies.

Funding for school systems

With the changes to the CTC methodology in 2020, transition arrangements for systems will now be applied at the school level rather than at the system level which has been the methodology since 2014. Systems will still be able to redistribute funding between schools.

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